Tracy Corrigan is a columnist and assistant editor of the Daily Telegraph, who writes mainly on business and finance. She was previously with the Financial Times, most recently as head of the Lex Column.

Interest rate cut will help some, but not without hurting others

Such is the political pressure on banks at the moment that there is a good chance they will be fairly speedy about passing on the Bank of England's 1 percentage point cut in interest rates to 2 per cent. If we are lucky, this will allow more homeowners to carry on paying the interest on their mortgages, which should also help bolster the housing market.

It certainly needs all the help it can get. The average UK house price fell Â£31,500 in the last year, according to Halifax.

But what will the effect be on the UK's banks, whose problems are at the root of our economic difficulties. Theoretically, rate cuts help banks make more money, because banks borrow at short-term rates but make longer-term loans. This means that lower short-term interest rates should boost profit margins.

However, the main problem for banks at the moment is that they have no access, except with government help, to the wholesale money markets. They are therefore more reliant than ever on savers putting their money on deposit. And that, unfortunately, does not look a terribly desirable thing to do. The snag is that you can't force banks to pass on rate cuts to borrowers without expecting those same cuts to be imposed on savers. So this rate cut is terrible news for retired people, struggling to get by on the income from savings.

It also means that banks will continue to struggle to attract deposits. Their own financing problems are far from over and that will make them reluctant, or unable, to meet the demands for financing and re-financing they face next year.

That doesn't mean that cutting rates was the wrong thing to do. It just means that, once again in this crisis, each beneficial measure also brings more pain.